Services the victor under AUSFTA

Services the victor under AUSFTA

While the newly-signed free trade agreement with the US has many implications for local developers of IT products in Australia, the IT distribution channel is likely to feel little affect, according to industry commentators.

The Australia-United States Free Trade Agreement (AUSFTA) provides free and open access to the US market for most Australian exporters, and similarly provides free and open access to the Australian market for most US exporters. It removes the duties payable on 97 per cent of Australian-manufactured exports, and 99 per cent of US-manufactured imports.

Industry commentators do not expect that these reductions in tariffs will reduce the price of most IT goods distributed in the channel. The United States Trade Representative (USTR) has listed Information Technology products as one of its key manufacturing industries to benefit from the reduced tariffs, but does not provide any detail as to how.

Managing director of broad-based distributor Ingram Micro, Steve Rust, said the impact on the local channel was likely to be dampened by the lack of duties currently applied to the importation of IT goods.

“There used to be duties on things like networking equipment, but these were whittled away some time ago,” he said. “There has not been a great deal of tariffs on IT products coming into Australia because we have [historically] had no significant manufacturing industry to protect.”

GfK marketing analyst, Chris Herbert, said he did not expect the agreement to reduce prices considering most of the world’s computing goods were manufactured in and distributed from Asia, regardless of whether they were developed in the United States.

The services channel

While the IT product channel may not experience significant changes as a result of the agreement, other companies engaged in product development or IT services will be reading the fine print very carefully. The agreement provides some potential for gaining revenue from lucrative US Government contracts, offset by the same opportunity for US firms in Australia. The agreement offers Australian companies access to the $270 billion market for Federal procurement in the US. Australian companies will be given a “waiver” from US procurement programs that favour US firms and products. For example, when Australian companies bid for US Federal Government contracts the usual six per cent penalty imposed on non-US products under the Buy America Act will be waived.

In turn, US suppliers are being offered the right to bid for contracts from 80 Australian Government contracts — including key ministries and Government enterprises.

This element of the agreement has impressed several industry commentators.

“Given the already broad access US firms enjoy to the Australian market, AIIA views the procurement developments in the FTA as positive,” chief executive officer of the Australian Information Industry Association, Rob Durie, said.

The opening up of the US market, coupled with reductions in licensing requirements, harmonising of standards and the elimination of other non-tariff barriers could prove to be of particular benefit to professional services exporters, according to Australian Trade Commission chief economist, Tim Harcourt.

“The Australian negotiators have done a fine job to open up market access but it is now a matter of encouraging Australian business to take up those new opportunities in America,” he said. Australian Computer Society (ACS) president, Edward Mandla, said that while the key focus of the FTA was to help Australia’s primary producers and manufacturers, the ICT sector had also been a winner by gaining its first real access to these US government markets.

“Most Australians would be surprised to learn that US Federal practice has been to only give government contracts to American firms,” he said. “Coupled with commitments ensuring non-discrimination against Australian service suppliers, this will open up access for our ICT firms to this very strategic and lucrative market.”

Mandla said he was particularly pleased to see mutual recognition of qualifications in professional services between the two countries, particularly the potential boost this could provide to trade associations like the ACS.

“This should promote export of Australian ICT services and give the ACS opportunities in accreditation and promoting recognition of ACS membership in the US,” he said.

Commentators agreed that the scraps of information on the agreement provided by the Government so far contain some positive news for the IT services channel, but all were awaiting further detail.

“While the final text will provide far greater clarity for the ICT industry, the information we have received [thus far] indicates that many of the industry’s key concerns are reflected in the AUSFTA,” Durie said.

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